Dreamspinner Press Restructures as Authors Cry Foul

[Paperbackstash]

Florida-based LGBTQ romance publisher Dreamspinner Press retained law firm Berger Singerman LLP in mid-December to handle restructuring of the company as complaints from authors about unpaid royalties mount. Dreamspinner CEO Elizabeth North said the press plans to “remain open, viable, and operating” and that it “does not intend to file bankruptcy at this time, as we believe that with proper guidance and cooperation, we can work through the issues we are facing.”

Full article here

[Paperbackstash]

I remember hearing about unhappy authors and unpaid royalties on Twitter. Curious if it can be turned around.

[fjtorres]

They might go the way of Nightshade.

http://www.michaelastackpole.com/?p=3288

Once small tradpubs hit the rocks they rarely recover. If the cashflow was inadequate before crisis, it rarely goes up, much less enough to catch up on debt.

[Josieb1]

For now they are determined to carry on, although tons of authors have left.

Any publisher which steals author royalties (as that is what they have done) should go under, they don't deserve to turn it around. I feel sorry for the authors as they have hardly any chance of ever getting their money.

[fjtorres]

Originally Posted by Josieb1

For now they are determined to carry on, although tons of authors have left.

Any publisher which steals author royalties (as that is what they have done) should go under, they don't deserve to turn it around. I feel sorry for the authors as they have hardly any chance of ever getting their money.

The money is history.
The question is whether they can recover the copyrights or not before a formal bankruptcy. In publisher bankruptcies the copyrights are considered corporate assets and the authors unsecured creditors.

https://www.publishersweekly.com/pw/...ankruptcy.html

[j.p.s]

Originally Posted by fjtorres

The money is history.
The question is whether they can recover the copyrights or not before a formal bankruptcy. In publisher bankruptcies the copyrights are considered corporate assets and the authors unsecured creditors.

https://www.publishersweekly.com/pw/...ankruptcy.html

Looks like authors' contracts with publishers need a clause that copyright reverts to author upon royalty payment default and probably another that the copyright can not be transferred to anyone but the author.

[pwalker8]

Originally Posted by j.p.s

Looks like authors' contracts with publishers need a clause that copyright reverts to author upon royalty payment default and probably another that the copyright can not be transferred to anyone but the author.

Most contracts can be voided for failure to perform. The trick is to get it done before it bankruptcy.

[j.p.s]

Originally Posted by pwalker8

Most contracts can be voided for failure to perform. The trick is to get it done before it bankruptcy.

And yet home mortgages tend to have clauses to the effect that upon failure to keep the lawn mowed the entire balance becomes due and payable, sometimes with prepayment penalty triggered.

[pwalker8]

Originally Posted by j.p.s

And yet home mortgages tend to have clauses to the effect that upon failure to keep the lawn mowed the entire balance becomes due and payable, sometimes with prepayment penalty triggered.

I'm not sure what that has to do with anything. Certainly a bank can foreclose and seize the house if you fail to pay the mortgage. Many authors have clauses in their contracts where the rights revert back to them under various conditions, such as a book remains out of print for a period of time. I'm talking about normal contract law though.

[Byrdie]

So ... I guess that means it's a good idea to download & secure via Calibre & Aprentice Alf any books bought from their site, eh? Just in case it goes the way of AllRomance, Fictionwise, & others. Heck, now I'm wondering about buying from them at all if the authors aren't getting paid.

[fjtorres]

Originally Posted by j.p.s

Looks like authors' contracts with publishers need a clause that copyright reverts to author upon royalty payment default and probably another that the copyright can not be transferred to anyone but the author.

Only if executed *before* bankruptcy.
Once the bankruptcy court takes over any such clause is void.
The copyrights become corporate *assets* to be sold to pay off creditors; secured debtors first and then if anything is left, the unsecured debtors. The contracts go to whoever buys them, even for pennies on the dollar.

(Other contracts--leases, labor deals, etc--can be downgraded or voided at the court's discretion.)

That is what authors caught in the Nightshade mess faced: agree to reduced royalties so Skyhorse would buy the contracts without bankruptcy or wait (years?) for bankruptcy to settle where the copyrights were going.

There's a reason why publishing contracts are referred to as "sales" by authors and publishers. Authors assign control of the copyright for the duration of tbe contract, most often these days is the life of the copyright. if you look at the copyrights of older, pre-80's books, odds are many have been handed down publisher to publisher to publisher as the industry has consolidated from hundreds of publishers to a few dozen big and medium houses.

Here's some TLDR about the Medallion case.
(snark included)

https://www.thepassivevoice.com/meda...-7-bankruptcy/

Absent such provisions, the publishing agreements between Medallion and its authors are assets that the bankruptcy trustee will try to sell for the best price possible to whoever will pay that price. Any claims for unpaid royalties owed to authors will likely be rolled into the pile of unpaid debts of Medallion and cash resulting from sales of assets will be divided among the printer, the utility companies, UPS, the bookstores that have returned Medallion books for a refund and not been paid, etc., etc., etc., and the authors.

The bankruptcy court determines what happens under the contracts that are held by the individual or company filing for relief under US bankruptcy law. As stated above, generally speaking, under Chapter 7, the bankruptcy trustee tries to sell the assets owned by the person or company filing for bankruptcy relief to whoever offers to pay the highest price.

The new publisher might be Random House or it might be Kevin the Krusher, New Jersey junkyard magnate, who buys the publishing contracts as a gift for his spoiled son, Digby, who has always wanted to be a member of the literary set.

If the Medallion publishing agreements include the most unfortunate, but quite common provision by which the author granted Medallion the right to publish his/her books for the full term of the copyright the author owns for the book (typically, the rest of the author’s life plus 70 years in the US), each of the Medallion authors can look forward to receiving royalty statements (or not) from Digby every once in awhile accompanied by royalty checks (or not).

After Digby retires, Digby, Jr., may become the publisher followed by Digby III (or not).

Or, if the circle of life applies to publishing contracts, perhaps Digby will burn through all his father’s money and file a petition for relief under Chapter 7 of the Bankruptcy Code.

This has happened before and it will happen again.

[j.p.s]

Originally Posted by fjtorres

Only if executed *before* bankruptcy.
Once the bankruptcy court takes over any such clause is void.
The copyrights become corporate *assets* to be sold to pay off creditors; secured debtors first and then if anything is left, the unsecured debtors. The contracts go to whoever buys them, even for pennies on the dollar.

What is the magic that allows top executives bonuses, golden parachutes, and pensions to survive bankruptcy?

[fjtorres]

Originally Posted by j.p.s

What is the magic that allows top executives bonuses, golden parachutes, and pensions to survive bankruptcy?

The way they're accounted for and paid, of course.

Steve Jobs only received a dollar a year in salary.
Stock options, warrants, perks, and other forms of compensation made up most of the compensation. All via contract so they show up as secured debt rather than operational costs under bankruptcy. Very common.

Remember, too, there are two kinds of corporate bankruptcy: chapter 11 reorganization and chapter 7 liquidation. Under liquidation executive pay is moot; they've already bailed. And under reorganization they usually leave after filing.

Big companies can go through multiple phases of reorganization but small companies going chapter 11 often end up in liquidation. And sometimes big companies go 11 and end up in 7 involuntarily, like Borders.

[Apache]

The judge can also rule them the property of the court even if disposed of before bankruptcy filing. A man returned his truck to the bank before filing bankruptcy. The judge ruled that the bankruptcy took precedence and the truck was seized by the court.
Apache

[pwalker8]

Originally Posted by fjtorres

Only if executed *before* bankruptcy.
Once the bankruptcy court takes over any such clause is void.
The copyrights become corporate *assets* to be sold to pay off creditors; secured debtors first and then if anything is left, the unsecured debtors. The contracts go to whoever buys them, even for pennies on the dollar.

(Other contracts--leases, labor deals, etc--can be downgraded or voided at the court's discretion.)

That is what authors caught in the Nightshade mess faced: agree to reduced royalties so Skyhorse would buy the contracts without bankruptcy or wait (years?) for bankruptcy to settle where the copyrights were going.

There's a reason why publishing contracts are referred to as "sales" by authors and publishers. Authors assign control of the copyright for the duration of tbe contract, most often these days is the life of the copyright. if you look at the copyrights of older, pre-80's books, odds are many have been handed down publisher to publisher to publisher as the industry has consolidated from hundreds of publishers to a few dozen big and medium houses.

Here's some TLDR about the Medallion case.
(snark included)

https://www.thepassivevoice.com/meda...-7-bankruptcy/







This has happened before and it will happen again.

For the most part, author contracts assign copyright for the duration of the contract, which generally speaking is _not_ the same as the duration of copyright. All you have to do is look at some of your favorite authors and see the various publishers they have used over the years. As an example, Jerry Pournelle's West of Honor started with Pocket Paperback in 1978 and was later published by Baen Books in 1987. Last time I looked, copyrights last longer than 9 years. Birth of Fire was published in 1978 by Laser Books, and was later published by Baen Books. One can go through numerous authors who were in the business long enough to have a backlist and see this.

Most authors who aren't desperate and know what they are doing, have various out clauses, typically depending on sales. If sales drop below a certain figure per year, then the rights revert to the author. Fairly obviously, if the book is out of print, then odds are the sales have dropped below that figure.

Small niche publishers and authors that use them tend to be in a different space. In general, authors in this space tend to fall into the desperate group, i.e. they can't interest the bigger publishers. Some are mid-tier authors who are on the downward slope, or are trying to find someone who will publish their backlist (Stackpole probably falls in this group). The mid-tier authors, if they have any sense at all, will only assign the paper rights to the niche publisher and keep the eBook and audiobook rights separately.

My father use to talk about one of his first professional jobs where the employees were paid on Friday and everyone rushed to the bank in case some of the checks bounced. Needless to say, he started looking for another job as soon as this started to happen. This is no different. Stinks to be in that situation, but any author in this situation who hasn't been paid his royalties and didn't go to a lawyer after the first missed payment is not a very wise business person.